Out with the Old, in with the New Generation
by Jiro Okochi, Reval CEO & Co-founder
This year opened with some impactful consolidation among TMS vendors, causing market observers to take notice once again of what technological change means and why it matters. Most are left wondering about which vendors are truly equipped to provide the kind of nimble, enabling technology needed for collaborating and innovating across the global enterprise, and which cannot or will not commit to treasury’s changing needs. Vendors that can’t convert to cloud-based SaaS technology or keep up with the increasingly sophisticated needs of treasury, will have a tough time remaining independent. Legacy technology, which cannot provide treasurers, CFOs and CIOs with a sustainable, intelligent, and collaborative infrastructure to support corporate performance objectives, will go the way of the dinosaurs.
While treasury has been steadily evolving, converging forces are now catapulting disruptive change upon this function’s status quo. There are several forces at play that are transforming treasury requirements and the technology necessary to address them. Chief among these forces are the effects of globalisation on the organisation, the burgeoning realisation that all things can and should be seen as risk, and the need for technology that leap-frogs over the limitations that old technology imposes.
As companies continue to expand their global footprint into markets riddled with risk, treasurers are expected to provide strategic guidance in financial performance and risk management. To be successful, they need to be aware and understand the effects of changing domestic and international regulations on cash and hedging activities, and they need the intelligence necessary to articulate their strategies to executive management and the board. This requires that they have global visibility into all risks from operational to financial – across cash, counterparties, debt and derivatives. It also requires a collaborative and interconnected workflow across the enterprise, regardless of function, location or time zone.
One McKinsey report, Five steps to a more effective global treasury, explains that, “The pace of growth and regulation has left too many [treasurers] lagging behind on even core activities in their home markets: cash management, banking, debt and funding, investments, and risk management for currencies and interest rates. Such shortcomings are only magnified as companies expand into emerging markets, where even world-class treasury departments struggle to navigate varied banking protocols and diverse languages and customs—and often lack an operating model and infrastructure to connect their activities, portfolios, and risks.”
Treasurers of large multinationals are currently hard at work optimising their organisations for enterprise level, straight-through processing and collaboration, ensuring they have the integrated capabilities and the resulting intelligence to navigate the uncertain and volatile financial world. It is this reality that treasurers face today, and with the weight of the company’s overall performance resting squarely on the treasurer’s shoulders, technology must evolve and transform in kind.
Because ’risk’ looms too large in treasury’s changing requirements for its technology to be considered simply as T-M-S, a more accurate description of the next generation treasury technology is T-R-M, or Treasury and Risk Management. And because it is the user community that drives how information is consumed and shared across the enterprise, the one-to-many delivery model of cloud-based SaaS technology makes SaaS TRM truly transformational. For treasury, this means that there is no going back to older client/server or ASP technology that can’t keep up with the pace of change or sophistication that is required to operate in a dynamic, global business environment. TMS vendors whose business objectives and technology development paths do not align with or simply cannot support the needs of the function face the difficult choice of either investing to convert their products and solutions or opting out of the market by selling.
The TMS space as we’ve known it is now past the inflection point. In order to survive, dominate and change this space forever, the winners will have to be financially strong enough and innovative enough to carry a transforming industry into the new world of interconnected, sustainable Treasury and Risk Management.